I make a point of reminding my clients to review their beneficiary designations on their employer based retirement plans, life insurance, IRA’s and accounts with transfer on death assignments. The same could be said of beneficiaries outlined in their wills (you have a will, don’t you?). I was happy to see that the February 2013 issue of Consumer Reports listing this as the number one mistake in their article, 7 Money Stumbles to Avoid.

Why is this so important? It’s because huge unintended consequences could happen if you fail to review this on a periodic basis. For example:

• Many people have trust arrangements set up within their estate planning but many people fail to change the beneficiary designations on accounts when the trust is established, potentially ruining the whole estate planning strategy they wanted to employ.

• It is not uncommon for former spouses to still be listed as beneficiaries on an individual’s life insurance or retirement plans.

• If you have an ERISA based retirement plan like a 401(k) or 403(b) and remarry, did you know your new spouse is automatically your 100% primary beneficiary? This may be the intent of the person, but it may not necessarily be that way if children from a former marriage are involved. And by the way, prenuptial agreements don’t work here.

• I’ve seen parents still listed as beneficiaries even though their child has long been married and has a family of their own that they need to financially support.

• Listing an estate as a beneficiary of a retirement account can have the unintended consequence of having the funds disbursed (and taxed) even if the beneficiaries didn’t need the funds and would opt to defer the receipt of these funds (and the tax consequences) to a later date.

• Having a child who has special needs lose their government assistance because they were improperly named as a direct beneficiary rather than a special needs trust.

• Not only beneficiaries, but the designation of guardians for your children, executors and trustees are good to review as well within your estate planning documents.

On an annual basis, it’s a good exercise to go through this to make sure that all of this is still aligned with your goals. And I would confirm any beneficiary designations directly with the financial service firm that you are working with rather than assuming they have the latest paperwork that you filed on hand. In the end, this is a very simple exercise that can save your family a lot of grief later down the line.